If interest rates increase, the
A) quantity of money demanded will increase.
B) quantity of money demanded will not change.
C) money demand function will shift to the right.
D) quantity of money demanded will decrease.
E) money demand function will shift to the left.

Question

Quizplus · Accepted Answer

When interest rates increase, the opportunity cost of holding money increases, which means people will demand less money. Therefore, the quantity of money demanded will decrease.

If Interest Rates Increase, the